Why is NJ denying so many applications for COVID homeowner assistance?

New Jersey has given out less than 4% of federal funds set aside to cover mortgage payments, property taxes, homeowner’s insurance and other housing costs for struggling homeowners over the course of a year. The state has rejected more than twice as many applications as it has approved, and advocates say the process needs more clarity and communication.

The Garden State paid families $10 million of the $270 million budgeted for direct payment assistance from October 2021 through September 2022, according to the latest quarterly and annual reports obtained by NorthJersey.com through a public records request from the Housing and Mortgage Finance Agency (HMFA), which administers the program.

About 700 families, or less than 10% of applicants, secured interest-free forgivable loans from New Jersey’s Emergency Rescue Mortgage Assistance program. Nearly 4,800 submissions are being reviewed, and almost 1,900 families — or a quarter of applications — were denied.

While other states have distributed their housing assistance from the American Rescue Plan stimulus package more quickly, New Jersey officials say the state is meeting its goals and “refining” the process so more low- and middle- income families are eligible for help to prevent foreclosure if they had fallen behind on housing bills due to COVID-19.

For instance, in August, NorthJersey.com reported that the state rejected more than 100 applications because families owed more money to lenders than the program cap of $35,000. It took close to a year for states to make applications available after Congress allocated the money, and nearly two years into the pandemic, many families continued to rack up more debt.

So in September, the HMFA increased the maximum award to $75,000, and it is reviewing applications it previously denied for exceeding the lower initial cap. On Thursday, the governor's office said HMFA approved a majority of these applications.

“As with any large-scale relief program, an initial ramp-up period was expected in setting preliminary targets, after which the program has yielded more rapid and efficient handling of applications,” said Christopher Ryan, HMFA communications coordinator.

But the new higher cap was not publicized through a news release, on social media or in any email updates that New Jerseyans could sign up for on the ERMA website, so homeowners owing more than $35,000 may not know they are now eligible. Delinquent homeowners associations dues and fees are also now eligible under the ERMA program.

More:NJ got $270M to help homeowners prevent foreclosure, but it's paid out less than 1%. Why?

More:How to apply for up to $35K in NJ housing aid if you were financially hit by pandemic

But many other struggling New Jerseyans who didn't exceed the earlier cap still don't understand why their applications didn't pass muster.

After Marla Taliaferro’s husband died in December 2020 and she suffered a series of health emergencies, she fell behind on her mortgage. There were days the 68-year-old went without eating because she had to pay a bill, and everything from food to gas seemed to get more expensive after the shutdown.

She applied for ERMA assistance in March 2022 with the help of a housing counselor, but after three months of waiting, she was denied. She said someone at HMFA told her over the phone that she didn’t indicate on her application that she lost income in 2019, which confused her because that isn’t a requirement.

Taliaferro didn’t know what else to do, so she sold her Paulsboro home to pay off her mortgage and liens and moved in with her daughter in Mays Landing, an unincorporated community in Hamilton Township in Atlantic County

“It hurt me to my heart because I didn't plan on moving,” Taliaferro said. “I’m devastated because I don’t have a home on my own. I’m looking, but I can only afford to live in a little box. This didn’t have to happen.”

Unnecessary barriers

Nearly half of all denials by the state were due to “lack of COVID-related financial hardship,” followed by income eligibility — families must earn less than 150% of their county’s median income to qualify, a federal requirement. More than 100 families did not respond to HMFA “after an extended period and agency outreach,” and another 100 mortgage servicers refused to participate in the ERMA program.

“It’s been very all over the place over what HMFA is actually asking for in terms of proof,” said Maryann Flanigan at Legal Services of New Jersey, who helps homeowners with their applications. “I don't think we’ve spoken to a client that got it right the first time, and we’re not sure how to get it right because it’s not explained on the website.”

Homeowners are required to show they lost at least 10% in income or had expenses rise by at least 10% as a result of the pandemic, a requirement not used by many other states. The U.S. Treasury asked New Jersey officials why they chose to include that qualification, and asked how the state decided it would not “create unnecessary barriers.” The agency said it previously implemented programs with a 15% requirement, but decided 10% was “more reasonable.”

HMFA said it strongly encourages families to enlist free housing counselors to help them fill out applications and gather proof such as tax documents, profit-and-loss statements, bankruptcy documents, and bills, invoices or receipts for items that show the pandemic led to increased costs.

Other pieces of information that could be helpful to homeowners are buried in documents on separate websites. For instance, to be eligible for certain awards, a homeowner must have a 55% housing debt-to-income ratio, or the amount of a family's income pre-promised to housing expenses each month. That is not included in the website’s FAQ or main pages, but in an underwriting guidelines document.

An applicant may also be stumped when filling out pre-screening questions that are focused on people who have mortgages and need mortgage assistance, Flanigan said. The application requires a resident to upload a mortgage statement, even if they don’t have a mortgage and instead need help with property taxes, for example. HMFA should first ask a user what debt they need help paying for and tailor the questions to their answer, Flanigan recommended.

New Jersey should also hold ongoing training sessions with Housing and Urban Development counseling agencies to make sure the process is going smoothly. Flanigan had clients who were denied help because they didn’t have access to a computer and wanted to do an application over the phone, while others’ applications were held up because counselors demanded more documentation in their intake process to help the clients than the ERMA application required.

It would also be helpful if ERMA’s portal relayed more detailed information about the status of an application, other than “pending,” Flanigan said. Is the state waiting for a mortgage lender to sign off, or a counselor to submit more documentation? Knowing the next step in the process could allow the homeowner to give a nudge to the party holding up the application to make the process go more quickly.

New Jersey routinely leads the nation in foreclosures, having nearly the highest rate of filings in October 2022, behind only Illinois and Delaware. Nationwide, about one in every 4,339 homes had a foreclosure filing that month. New Jersey had double that — one in every 2,305 homes had a foreclosure filing, according to ATTOM Data Solutions.

HMFA has begun to speed up the ERMA approval process, said Ryan, the agency's communications coordinator. In October and November, the agency authorized an additional $8 million in mortgage and tax assistance, bringing to 1,000 the number of families helped since the start of the program. HMFA is considering another 400 applications that are in the pre-approval stage. Families in need are submitting more than 100 new applications a week.

“NJHMFA is confident, as evidenced by the trend lines, that the ERMA program is on pace to meet all of the goals agreed upon with the U.S. Treasury,” Ryan said.

The ZIP codes where families secured the greatest number of ERMA loans so far include Egg Harbor Township (08234), with 16 awards; Willingboro (08046), with 15 awards; Atlantic City (08401), with 13 awards; Teaneck (07666), with 11 awards; and Lakewood (08701), Roselle (07203) and Linden (07036), with 10 awards each.

Nearly two dozen states post dashboards online with daily or weekly updates about their homeowner assistance programs, according to the National Council of State Housing Agencies. New Jersey is not one of them.

This article originally appeared on NorthJersey.com: Why is NJ so slow to pass out COVID funds to homeowners in need?